HOW THE AFFORDABLE CARE ACT AFFECTS EMPLOYERS WITH LESS THAN 50 EMPLOYEES

August 23rd, 2016 No comments

Under the Affordable Care Act, large employers must either offer “minimum essential coverage” that is “affordable” and that provides “minimum value” to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions”.

If you are an employer who had less than 50 full-time employees, including full-time equivalent employees, on average during the prior calendar year (2015), you are Read more…

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“You Are Going to Be Arrested” says the Criminal

August 16th, 2016 No comments

Scammers are calling taxpayers and threatening to have a magistrate come to their home unless they pay their IRS tax debts. The IRS has reported that it is seeing a significant increase in automated phone calls from con artists pretending to work for the IRS and demanding overdue taxes.

If you do not answer your phone, these criminals leave urgent callback requests on your voice mail telling you to call back to settle your “tax bill.” The bogus calls generally purport to be the last warning before the IRS takes legal action against unsuspecting taxpayers. When a victim calls back, the con artist threatens to arrest or deport the taxpayer or revoke their driver’s license if they don’t agree to pay up.

The scammers have increasingly been asking unsuspecting taxpayers to make the payment via iTunes gift cards and similar cards. The IRS pointed out that Read more…

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THE BANK SECRECY ACT MAKES SELF-PREPARED TAX RETURNS VERY EXPENSIVE

August 9th, 2016 No comments

Every year we have new clients come to us to have their personal tax returns prepared because they are finding complying with the U.S. tax laws too complicated or preparing the returns consumes too much of their time. So to save $100 – $200 to have a return prepared by a tax professional, they were using a tax preparation firm where the employees receive minimal tax law training or self-prepared their return using TurboTax or another software product. When reviewing the prior year’s return, we often find that they have failed to comply with the U.S. tax and other laws and are subject to very onerous penalties.

For example, let’s look at the Bank Secrecy Act (BSA) that requires Read more…

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SHAREHOLDER COMPENSATION – BE PRUDENT AND TAKE THE NECESSARY STEPS TO DOCUMENT REASONABLENESS

August 2nd, 2016 No comments

We periodically remind our S Corp. clients of the importance of paying themselves a reasonable salary. We offer to perform a reasonable compensation analysis for them for a nominal cost, especially in light of the dollars at risk. There are those who respond that they have themselves determined that their salary is reasonable. When we hear these types of responses, we often think of the adage “What do you call an attorney who represents himself in court? A fool.” The same can often be said for these business owners who don’t understand how the IRS determines reasonable compensation.

For those of you who may not be familiar with the issue, the IRS discovered years ago Read more…

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ESTATE (NON) PLANNING – IT SADDENS US TO HEAR

July 26th, 2016 No comments

How sad it is to hear from a client that a loved one passed away and there was no estate plan in place. Grieving over the loss of a loved one is difficult enough without having to face the challenges of not having an estate plan in place.

Too many tomorrows create too many problems today. Implementing an estate plan should be a top priority and not postponed until a later date. This is one of those real life examples where it would have only taken a few minutes to contact an estate attorney to begin the process of creating an estate plan. Instead, the estate planning attorney is now being contacted to help clean up a potential mess where needed funds could be tied up in the courts for months. It reminds us of the old Fram oil filter commercial – “You can pay me now, or pay me later.” (It is much cheaper to change an oil filter for a few dollars than to rebuild a car engine for thousands of dollars.) By all means, pay the estate planning attorney today!

If you do not have an estate plan, your plan is several years old, if you have relocated to a different state, your medical health has significantly changed, or family members have passed away or new ones have entered the family, it may be an opportune time to call that estate planning attorney and request a consultation.

What is an estate plan? We will let the estate planning attorney address that with you. However, you may wish to become familiar with such terms as a will, a revocable and irrevocable trust, a living will or advance health directive, and a durable power of attorney. In addition, it is most important to review the beneficiaries listed on all retirement accounts and investment accounts. Despite what your expressed wishes are in your will as to your beneficiaries, some types of accounts are governed by the named beneficiaries in these types of accounts. So although your will says that your only child should receive your full inheritance, if your sole retirement account designates another beneficiary (such as a divorced ex-spouse), your daughter may not see a dime of your inheritance.

If you want to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.

Copyright © 2016 Keystone Financial Solutions, P.C.  All rights reserved.  BE SURE TO READ THE DISCLAIMER PAGE: Content in this blog is for educational purposes only and should not be considered as the rendering of tax, legal or investment advice. The publisher of this blog makes no representations as to the accuracy or completeness of any information herein, will not be liable for any errors or omissions, and shall not assume liability for any losses, injuries, or damages from the display or use of this information.
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LOAN GUARANTY CREATES IRA CRISIS

July 19th, 2016 No comments

Listen to the pitch, and then lose your shirt! Taxpayers are always looking for a means to reduce taxes and to use the Tax Code to their advantage. There is ABSOLUTELY nothing wrong with doing so. Unfortunately, many a taxpayer listens to the salesman’s pitch and does not consult with their tax advisor before implementing the strategy. After all, the sales pitch says that the promoter has an IRS private letter ruling (PLR) that these types of transactions are accepted by the IRS. Unfortunately, the PLR Read more…

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TUITION EXPENSES – HOW MUCH CAN YOU CLAIM AS A TAX CREDIT?

July 12th, 2016 No comments

The Tax Court case of Terrell, T.C. Memo. 2016-85, May 2, 2016 is an interesting case because not only does it address how much tuition a taxpayer can claim as an education credit, but also illustrates how useless the Form 1098-T is that is issued by most colleges and universities.

Looking at Form 1098-T, box 1 shows “Payments received for qualified tuition and related expenses.” Unfortunately, many schools of learning leave this box blank. Box 2 is usually completed by these schools and that box shows “Amounts billed for qualified tuition and related expenses.”

Since individual taxpayers are cash basis taxpayers, they are allowed tax deductions based on amounts paid, not amounts billed. Thus leaving box 1 blank does not tell the taxpayer what he paid to the learning institution as a qualified tuition or related expense.

In this case, the university filed with the IRS and sent to the taxpayer Form 1098-T, Tuition Statement. The form had no entry in box 1 for tuition payments received. Box 2 had $1,180 for amounts billed for qualified tuition and related expenses. Box 2 represented the $1,230 that was billed to the taxpayer on January 10, 2011, plus mandatory fees of $50, minus a tuition credit of $100.

On her 2011 return, Merrill claimed the American opportunity Credit of $2,500. The IRS disallowed the credit in its entirety, stating: Read more…

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HEALTH SAVINGS ACCOUNT – AN ALTERNATIVE STRATEGY

July 5th, 2016 No comments

If you own a Health Savings Account (HSA), you likely contribute to the plan each year and then withdraw funds from the plan to pay for medical expenses. The benefit to you as an employee is that your contributions to the HSA are made from pre-tax dollars, thus reducing the amount of income taxes, FICA, Medicare taxes you pay. This is a great way to reduce the amount of taxes you pay.

But, is this a sound strategy for you and your family? Are you aware that you may be able to do much more with your HSA contributions? Read more…

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RENTAL CAR INSURANCE – EXPENSIVE AND NECESSARY?

June 28th, 2016 No comments

If you are like most people, you detest the daily rate that the car rental companies charge for their insurance coverage.

I wish to share a personal experience with you. The last time that I traveled and reserved a rental car online, a pop up appeared on the car rental website offering me insurance coverage. The rate was reasonable so I purchased full coverage. On the day of my arrival to my airport destination, when I finally reached the rental counter to sign the paperwork, I was asked Read more…

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TALE OF TWO TAXPAYERS AND NON CASH CHARITABLE CONTRIBUTIONS

June 21st, 2016 No comments

This is a tale of two taxpayers being audited by the IRS for non-cash charitable contributions.  Let’s see how their audit exams went.

Taxpayer A (let’s call her Mary) made $3,000 worth of contributions to Goodwill, the Salvation Army, Wounded Warriors, and other non-profit organizations. Before delivering these goods to these charities, Mary always Read more…

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